Bengaluru, Jan 25 (IANS): Karnataka Chief Minister Siddaramaiah on Saturday held a high-level meeting on the issues faced by the public due to microfinance institutions.
Criminal cases will be filed against those involved in forced loan recovery. The law will also provide provisions for filing complaints voluntarily, he said.
Steps will be taken to strengthen the existing laws, including granting more powers to the police. The new law will include provisions to regulate unregistered money lenders, CM Siddaramaiah stated.
Forced and threatening loan recovery practices will not be tolerated. The government will take all necessary measures to protect the interests of poor borrowers, he assured.
He further appealed, "If anyone faces harassment from microfinance agents, they should report it to the local police. District authorities, including the Deputy Commissioners and District Police Superintendents, will hold meetings to create awareness among the public and issue warnings to microfinance agents."
Strict instructions have been issued to all Deputy Commissioners and Police Superintendents. They have been directed to establish helplines in every district office, where complaints can be filed. Police will register complaints proactively, he stressed.
The Central Government has prepared a draft regarding the Banning of Unregulated Lending Activities. Comprehensive consultations will be held on this matter to protect those trapped in the debt cycle and to urge the Central Government to enact appropriate laws to prevent harassment, he said.
The RBI has issued several guidelines on loan recovery. These include restrictions such as not visiting homes for recovery after 5 p.m., not using threats, and not involving third parties in recovery processes. Violators will face criminal action, he warned.
The RBI has set a limit on the amount of loans that can be given to a single family. Measures will be taken to ensure compliance with this limit and to enforce these guidelines effectively, he said.
During the meeting on microfinance issues, Chief Minister Siddaramaiah posed pointed questions to the heads of registered and licensed microfinance companies and sought answers.
What steps have you taken to prevent your staff from engaging in illegal loan recovery practices? What actions have your companies taken against such staff? CM Siddaramaiah questioned.
He further questioned, Before confiscating a borrower’s property, did you obtain permission from the court? Who gave your staff the authority to take the law into their own hands? Are you employing goons for loan recovery?
The CM asked, have you explained the Reserve Bank of India’s (RBI) terms and conditions to borrowers in their local language?
"Are you violating RBI regulations by giving loans beyond the prescribed limits? Why are you repeatedly lending to the same borrowers without assessing their repayment capacity?
Why are you not completing Aadhaar-based KYC verification before disbursing loans? If KYC was implemented properly, the issue of repeatedly lending to the same borrowers could have been avoided," CM Siddaramaiah pulled up microfinance company representatives.
The companies explained that those institutions which have not obtained a licence from the RBI are indulged in such activities.
The Chief Minister conducted the meeting at his official residence, Krishna, to discuss the operations and impacts of microfinance companies in the state.
Deputy Chief Minister D.K. Shivakumar, Home Minister G. Parameshwara, Law Minister H.K. Patil, Revenue Minister Krishna Byre Gowda, the Chief Minister's Political Secretary Govindaraju, Chief Secretary to the Government Shalini Rajneesh, Additional Chief Secretary Atique Ahmed, State Police Chief Alok Mohan, and senior officials from the Home, Revenue, Intelligence, and Internal Administration Departments attended the meeting.